Even if UK property prices are going down, rentals are at all-time highs.
According to the 2021 Census, the number of privately rented homes has more than doubled in the last 20 years, going from 2 million to 5 million.
In December 2022, the average rent in the UK went climbed 10.8% each year. In December, for the second time on record, the average rent for a home in Greater London was more than £2,000. HomeLet says that rents went up by 9.4% even when you take London out of the picture.
That may sound like a nice little profit if you are a buy-to-let investor or landlord, but these hikes imply that a single renter now pays on average 35% of their income on rent. This is the highest level of unaffordability for rent in over a decade, according to MoneyWeek.
Time Out wrote, “It’s not a great time for Generation Rent when you add in higher prices for things like energy and household goods.”
Why do rents keep going up?
Sky News claimed that the rental market is at its breaking point because there aren’t enough homes for renters to choose from, landlords are scared off by tax hikes, and there is more competition for locations.
Prices in the private rental market are going up because there aren’t enough homes to rent in the private market or in the social housing sector. “Properties are being snapped up before viewings, and bidding wars now seem to be the norm,” claimed Time Out.
Since last year’s mini-budget shook up the financial markets, mortgage rates have gone up for renters as well.
“Some would-be first-time buyers who could no longer afford the house they wanted or who wanted to wait until things calmed down before buying may decide to keep renting for a while longer,” wrote The Guardian. This would increase demand and rental prices.
But “sharp rent rises” may also be caused by landlords passing on higher interest rates from their own buy-to-let loans. In some circumstances, other landlords are following their lead even though they don’t have to. This is called a “rent ratchet” by the newspaper.
Where is rent most affordable?
It may not come as a surprise that the closer you live to London, the more probable it is that your rent will be higher.
Metro claimed that the ten most expensive places to rent are all in London. Money.co.uk research showed that the average monthly rent in Kensington and Chelsea was the highest at £2,199, which is 66.69% of the average gross monthly income in the borough. Hackney was in second place. The average rent there was £1,600, which was 65.77% of what people made.
Tom Mundy from the renting website Goodlord told The Times that there are more cheap options “within easy reach of the city centre.”
For example, Catford, in southeast London, is 11 minutes by rail from London Bridge, and the average monthly rent there is £1,012. On the other hand, you can take the train from Northampton to Euston, which takes 52 minutes and costs an average of £700 each month.
The average rent in UK cities is £1,087 per month, according to the property website MoveIQ. Moving only 4.6 miles outside of a city may save tenants roughly £225 per month, the site said. This saves about $2,700 each year on average.
Also, rents are usually less expensive the farther north you go. The average monthly rent for a three-bedroom home in Stoke is £843. This is over £4,000 less than what it would cost to rent the same size home in London.
The article said that Stoke-on-Trent was “the perfect place for renters who want to save money,” citing research from the insurance company CIA Landlords. The average rent in Kingston-upon-Hull was £862.27 per month, and the average rent in Sunderland was £968.04 per month.
In 2023, will rentals go up or down?
Zoopla claimed that the rental market isn’t expected to get cheaper any time soon since landlords will have to pay more to borrow money and there will be further changes to the law that will make investing more expensive.
The property website noted that the way money works when you invest in a home has changed in recent years. This is because of stricter rules and higher costs, which are lowering returns, discouraging new investment, and causing some landlords to sell their properties. This further reduces the number of homes for rent and drives up prices.
This year, rentals will go up because of “persistent pressure on first-time buyers, inflation, and high demand,” said FT Adviser. It said that broker Finanze thinks that prices will go up by 12.91 % across the UK.
Property Road reported that the Royal Institute of Chartered Surveyors predicts a rise of up to 15% this year if nothing is done to reform the buy-to-let market.
Sky News claimed that renting out property is becoming less appealing because landlords now have to pay an extra 3% stamp duty on each property they buy and have lost tax breaks that let them offset company costs. As more landlords depart, “rents are going up because demand is growing faster than supply,” the news site said.
Can tenants fight an increase in rent?
Tenants in Scotland are now enjoying a rent freeze that will last until March 31, 2023. However, this has been ruled out for tenants in England and Wales because the government thinks rent restrictions will “deter investment and cause property standards to fall,” according to Mortgage Strategy.
Shelter, an organisation that helps people who are homeless, advised that if your landlord has utilised a rent review provision, the only method to fight a price rise is to negotiate.
Renters can also take their landlord to a property tribunal for free to dispute their rent, but Shelter warns that “there is a risk that a tribunal could set a higher rent than your landlord is asking for.”
In a bill called the Renters’ Reform Bill, which will be talked about in Parliament this year, the government has promised renters greater rights.
Under the new rule, landlords won’t be able to kick out tenants for “no reason,” and they’ll only be permitted to do so in “reasonable circumstances.”
Big Issue noted that there hasn’t been much done to fix the reasons why rents are going up, which include “high demand for properties and a lack of supply.”
For more news click prenews.co.uk